Under the Volcker rule, ownership interests in covered funds (in other words, investments) will not be permissible and will have to be divested by 2015. Ownership interests in covered funds subject to the Volcker rule include many pooled trust preferred collateralized debt obligations, certain collateralized loan obligations and possibly Real Estate Mortgage Investment Conduits. At this conjuncture, the full scope of investments impacted is unknown.

U.S. GAAP requires entities to evaluate unrealized losses for "other than temporary impairment." Unless an entity has the intent and ability to hold the investment until recovery, an impairment charge is recorded. With the rule just recently finalized, it would seem unlikely that such an assertion could be made which means the impairment may need to be recognized in this quarter.

The banking agencies issued a FAQ today, which provides additional guidance on whether banks’ interests in CDOs backed by trust preferred securities are ownership interests in covered funds under their final rules, but did not address the broader accounting impact. Based on this issuance, the banking agencies did not offer any changes and it is still unclear if the SEC will step in to do so. Therefore, banks should begin analyzing their portfolios to determine if any instruments meet the scope, and if so, the impact for Dec. 31 reporting.

The AICPA will continue to follow and report any new findings.

Salome J. Tinker, CPA, Senior Technical Project Manager, Accounting Standards, American Institute of CPAs. Salome’s focus is on accounting standards affecting depository and lending institutions and she oversees the Depository Institutions Expert Panel. Prior to joining the AICPA, Salome worked for Fannie Mae, the Board of Governors of the Federal Reserve and the U.S. Army. She has a B.B.A. in Accounting from Howard University.